Service charge

“Ban on service charges in food bills without any legal basis”

NEW DELHI: The National Restaurant Association of India (NRAI) said on Wednesday that the government cannot change the collection of service charges in food bills by setting guidelines and that the CCPA’s decision to ban hotels and restaurants from this practice has created unnecessary confusion among consumers and disrupted the smooth operation of Restaurants.

He alleged there was an attempt to launch a campaign against this restaurant industry practice without any legal basis through ‘repeated directions’, while claiming that the service charge is part of the total price of a product and that neither the government nor any authority can interfere with the business owner’s decision in this regard.

In a statement, NRAI argued that the service charge is part of the owner’s discretion or decision regarding the total price to be paid by a customer in connection with the sale or service of a product.

“It is one of the components of the total price of the product. Neither the government nor any other authority can interfere with the business owner’s decision in this regard. It is a universally accepted business practice,” he said.

The NRAI also asserted that the legality, reasonableness or justification of levying service charges has been reviewed by the Supreme Court, High Courts, National Consumer Dispute Redress Commission, former Monopolies Commission and restrictive business practices and by the income tax authorities (ITAT) and have been “confirmed in various court decisions”.

“So it’s up to the owner how to run their business and what policy should be in place regarding product pricing. The government cannot make a change regarding a service charge levy by setting guidelines,” he said.

Stressing that the guidelines, by the very nature of things, are only indicative, the industry body said: “If such a change is necessary, there must either be a new law or an amendment to existing laws”.

The NRAI further stated, “It is also relevant to state that additional fees are levied by many other industries, including some government agencies. However, the guidelines are only issued for the restaurant industry.

On Monday, the Central Consumer Protection Authority banned hotels and restaurants from levying service charges automatically or by default on food bills and allowed customers to file complaints for breaches, amid increase in consumer complaints.